The informal sector covers virtually all areas of economic activity. South africa is a country with a dual socioeconomic composition a large industrial base with a good infra structure the best in africa, but with a large third world component. Informal economy panel federation of unions of south africa. Informal employment accounts for a smaller share of nonagricultural employment in southern africa 33% in south africa and 44% in namibia relative to countries in other subregions 82% in. Reinikka, sector directors, africa human development. The nature of the south african informal sector as reflected in the quarterly labourforce survey, 20082014. This pdf is made available under a creative commons. Informal employment in south africa 3 contents tables 3 figures 3 executive summary 4 1. An analysis of national household surveys sector employers through the intervention of a labour broker, for example, are not likely to receive nonwage benefits e. Entry into and exit from informal enterprise ownership in south africa. The informal sector remains themajor source of employment across africa, accounting for 70 per cent of employment in subsaharan africa and 62 per cent in north africa afd20. The south african informal sector 1997 2006 hassan essop and derek yu 1 abstract according to the 2006 september labour force survey, approximately 22% of the employed excluding domestic workers and agricultural employment are engaged in informal sector activities as their main work to sustain themselves and their dependents.
Almost half 47% had been unemployed in south africa before starting their business. Schneider 2002 puts the size of informal economy in south africa as a percentage of gdp for the years 19992000 at 28. Pdf download for the informal economy in south africa. The informal sector serves as both an alternative opportunity and a space for aspiring entrepreneurs. Where the informal sector is able to function, it offers certain niche products. Improving skills development in the informal sector. Informal sector employment and poverty in south africa.
Aug 15, 2014 inside south africas informal economy. Pdf the dynamics of the informal sector in south africa. For example in india and ethiopia, up to 50% of those with jobs are employed in the informal sector. As such, there is a need to study the nature of south africas informal sector in order to adequately target policy interventions. Despite high unemployment, south africa s informal sector is small compared to many other developing countries. Only about three million people who are working about 18% of all employed 16. Leap investigates the role of the informal sector in the local economy. Understanding the informal economy in african cities.
South africans and 40%, coloured south africans, 5% foreign africans. Other estimates for the size of the south african informal economy includes an estimate from loots who estimated the size of the informal economy using the labour market approach to be 12. Sourcing data from the department of social development dsd, the report offers an overview of the nonprofit sector in south africa, providing information on the various roles in which npis are involved, their income sources, and what they spend read more. The challenges faced by informal traders in greater letaba. The international labour organization estimates that more than 66% of total employment in subsaharan african is in the informal sector. According to the quarterly labour force survey qlfs released by statistics south africa, this is the highest unemployment rate since stats sa started measuring unemployment using the qlfs in. Small informal sector and high unemployment in south africa 11 4. There is widespread agreement that the sector impacts positively on the economy through various avenues.
Temperature conditions in south africa are characterized by three main features. According to figure 2, compared to other cities in the global south, on average, african cities have a higher prevalence of informal employment, as seen in the cases of kampala and dakar, for. The size and structure of the south african informal sector 20082014. Overview of informal economy in south africa select sectors. The role of the informal sector in african economy talkafrique. With a multidisciplinary outlook, the journal will stimulate service delivery and performance challenges being faced in government. With south africa experiencing an unemployment rate of about 24 % statistics south africa 2015a, which is largely linked to the decline in the labour absorption capacity of the formal economy, the informal sector which currently accounts for about 2. However, in contrast to many other developing countries, the south african informal economy is still characterized by a high proportion of wage employment as. The south african informal sector there are over 750 000 informal businesses in south africa. Experts have argued that in most african economies, the informal sector is often the continue reading the role of the informal.
Mar 01, 2016 whilst we cannot answer this question, the situation in delft at least shows that the trends in the informal sector may vary greatly between a local area and the national picture. May 30, 2017 however, if we compare on a perjob basis, the poverty reduction associated with one informal sector job is generally between 50 to 100% of the poverty reduction associated with one formal sector job. Chen 2004 outlines three basic approaches to explaining the informal sector. Results suggest that informal economy in subsaharan africa remains among the largest in the world, although this share has been very gradually declining. One in every six south africans who work, work in the informal sector. Saharan africa has become a growing source of employment for large numbers of. Statistics south africa 2007 estimated nonagricultural employment in the.
Data not available informal settlement, limited social infrastructure. Informal businesses contribute five percent to south africa s gdp, with the sector itself growing in recent years, statistician general pali lehohla said on thursday 14082014. How important is the informal sector in urban food security. The informal economy in subsaharan africa international. Providing support to the informal sector could help south africa relieve some of its unemployment pressures, says the writer.
In a paper by stephan saunders that was published in the south african journal of economic and management sciences, he estimated the size of the informal economy to be 7. In malawi the informal sector can include vendors, such as people selling various merchandise such as vegetables. An exploration of the informal backyard rental sector in. Walking short taxi access to formal shops, rail terminal and middle class neighbourhoods. The size and composition of south africa s informal economy using an employmentbased definition of informal work, the number of persons in nonagricultural informal employment in south africa was estimated at 3. Dont underestimate the power of africa s informal sector in a global economy. We discuss the importancerole of the informal sector in the economy. African institute for communitydriven development case study prepared for the world banknetherlands partnership program evaluating and disseminating experiences in local economic development led investigation of propoor led in south africa, 2005. Firstly, it is relatively small when compared with many other developing countries. Nevertheless, at about 17% of total employment, one in every six workers is employed in the informal sector. Informal sector, panacea to the high unemployment in zimbabwe. Some employers pay well because company owners do not have many tax obligations. The informal sector is linked to the formal economy produces, distributes, and provides services to the formal economy the taxi industry which is mostly unregulated has close linkages with the formal vehicle companies, petrol and insurance industries the paper company mondi owns 117 waste recycling centres in south africa these centres are.
Question 3 study the article and answer the questions that follow. Set against the backdrop of south africa s constitutional requirements for local government to provide for the rights of all citizens and for them to benefit equally from. Determinants of urban consumers participation in informal. Skills development in the informal sector sub saharan africa. For this reason, the main contribution of this paper is furthering our understanding of the informal sector in african countries and the effects of globalization on this aspect of the labour market. Linkages between the formal and informal economy 5. This goes against the widelyheld belief that informal firms are small, familyrun enterprises. The state of the informal economy policy brief written by judith shier, based on research by richard devey, caroline skinner and imraan valodia, school of development studies, university of kwazulunatal. A regression model to estimate the informal economy was used in this study. South africa, household survey, labour market trends, informal sector. Red tape is onerous and pushes up the cost of doing business considerably, thereby reducing the potential number of employers categories of entrepreneurs are being hamstrung by legislation this legis. In terms of the wider economy, one measure suggests that the informal sector contributes about 26 per cent of total value added in south africa. Many senegalese are involved in various activities of the informal sector to cope with unemployment, to help their families or to learn handicraft. Statistics on high informal employment it is estimated that about 3 million out of a labour force of about million are in the informal sector and is growing at 8% per year.
The pros and cons of working in the informal sector in. This means that in these two regions, informal employment outside the informal sector absorbs only 20% of the workers in the informal economy, against nearly 50% in transition economies, 41% in middle east north africa and 35% in latin america. South africa s labour market has another important distinction. The workers in this sector also include hawkers, marketers, vendors, artisans, small veranda khondes businesses and cross border traders. The south african informal sector stellenbosch university. Best measured by a household survey such as the general household survey from statistics south africa. This paper presents an analysis of the nature of, and recent trends in, the south african. The sector, according to stats sa, accounts for 5% of the countrys gdp, remaining pretty. Understanding south africas economic puzzles dani rodrik john f. Adams world bank introduction since first recognized in the early 1970s, the informal sector of sub. In kenya, the informal sector is increasingly making use of mobile applications to record transactions, in order to access finance and banking, which is a possible solution for south africa.
The informal sector is a versatile and dynamic sector which includes a variety of economic activities. The reproductive health of women street vendors in johannesburg, south africa introduction the emergence of the informal economy a substantial majority of urban people living in developing countries are poor, and it has been estimated that by the year 2000 the worlds urban poor will reach 1 billion people. Braude 2005 estimated that informal sector in south africa comprises between 7 and 12 per cent of the total economy. Women tend to be concentrated more in the informal employment, so. Durban is credited as being the first city in south africa to develop a policy for street traders. It creates livelihood opportunities, contributes to alleviating poverty and serves as a buffer between employment and unemployment. Reported earnings from informal sector employees, informal employment in the formal sector, earnings from unregulated businesses street hawkers, spaza shops etc. The ilo estimates 21% of total employment is the informal sector, 8% in households largely domestic workers and 5% in the formal sector. May 11, 2011 the informal sector of the economy often refers to the unregulated and mostly unregistered sector of the economy, put simply it refers to the numerous petty or small scale businesses operated by artisans, peasants and other micro entrepreneurs, within the economy.
Over half 56% of the entrepreneurs had been unemployed before coming to south africa. Its implications for poverty and future economic strategies. Kennedy school of government, harvard university, cambridge, ma, usa. Informal sector key to creating jobs south africa news. Three aspects of the informal sector in south africa make it unusual. Growth in the number of jobs in the informal sector would be a sensible component of any plan to reduce poverty. South africa is periodically afflicted by drastic and prolonged droughts, which often end in severe floods. Urban analysts in the global south are concerned with the failure of african urbanization to resonate with. The idea of dualism in the south african economy, characterised by a. The contribution of informal sector to gdp in developing countries.
How big is south africa s informal economy, a pertinent question asked by biznews community member herald thiele this is where its all happening independent economist john maynard put his thinking cap on to find an answer, because as thiele said, government doesnt have an accurate answer. The purpose of this study is to determine which of these views most accurately describe the relationship between formal and informal employment in south africa. This report aims to take this discussion further by addressing the issue of smmes with a focus on informal and smme retailers in south africa. The informal sector is much smaller in south africa, accounting for about 21% of total employment, including domestic workers eca, 2005. Apr 04, 2017 but, variation within the region is significant. Assessment, estimates, methods, orientations for the future article pdf available january 2000 with 19,971 reads how we. The pros and cons of working in the informal sector all about the pros and cons of working in the informal sector, the informal sector and salaries and wages, labour laws and the informal sector and more on mywage zambia. An analysis of formal sector employment in south africa.
Case jointly with the southern african labour research institute. With the turn towards so called postfordist modes of production in the advanced. With a pervasive informal sector, city governments have been struggling with how best to respond. The main link between the informal sector and income poverty, in. The size and composition of south africas informal economy using an employmentbased definition of informal work, the number of persons in nonagricultural informal employment in south africa was estimated at 3. Introduction the growth and scale of informal employment in many developing countries has been traditionally attributed to the displacement of workers into insecure forms of labour market attachment as the only feasible alternative to unemployment fields, 1975. Nov 10, 20 reasons for high informal sector employment in south africa case studies from three informal sector contexts challenges facing south africas informal sector 9. This paper provides a detailed quantitative descriptive analysis of the south african informal sector between 1997 and 2006 using the. South africa faces developmental challenges of unemployment, poverty and ruralurban migration. Avocado production in south africa is an exportoriented industry, aimed primarily at the european market. It also finds significant heterogeneity, with informality ranging from a low of 20 to 25 percent in mauritius, south africa and namibia to a high of 50 to 65 percent in benin, tanzania and nigeria. Ilo research counterparts in south africa were the community agency for social enquiry. South africas informal workers in all sectors, remain largely unorganised and. T cambridge, massachusetts 029 1 am grateful to the wider security and development programme for providing.
The informal sector in south africa, therefore, should not be characterised as a homogenous sector which can provide freeentry to the unemployed. The same study found that, the contributes between 7sector 12 per cent of south africas total gross domestic product gdp budlender et al. The state of informal workers organisations in south africa sarah. Informal trade plays an important role in addressing these challenges. At a recent gathering of parties involved in the formal independent and informal retail trade, trade intelligence ti md maryla masojada shared some insights into the various trends affecting the industry.
South africa s unemployment rate increased by 0,1 of a percentage point to 29,1% in q3 of 2019. The dynamics of the informal sector in south africa a case study of day laborers in pretoria article pdf available january 2005 with 2,007 reads how we measure reads. Dont underestimate the power of africas informal sector. Informal enterprises provide livelihoods, work and income for more than 2. An informal trader sells oranges in durbans warwick avenue. The informal sector makes a considerable contribution to production, consumption and creation of employment and income generation in developing countries. On the other hand, the role played by the informal sector cannot be forgotten, especially since this sector. Informal trade in south africa municipal institute of. Firstly, temperatures tend to be lower than in other regions at similar latitudes, for example north africa.
The sleeping giant informal trade in south africa tweet. An informal economy informal sector or grey economy is the part of any economy that is neither taxed nor monitored by any form of government although the informal sector makes up a significant portion of the economies in developing countries, it is sometimes stigmatized as troublesome and unmanageable. Sustainable tourism development challenges in the eastern cape province, south africa. We explore characteristics of informal sector employment. This ranges from under 30% in south africa to 60% in nigeria, tanzania and zimbabwe. We explore challenges facing south africa s informal sector. They are located in both rural and urban centres, including growth points. But they coexist with a smaller number of very large enterprises. Little is known, however, about the effects of globalization on the informal economy and how changes in trade and fdi affect employment in this sector. Nine in 10 rural and urban workers have informal jobs in africa and most employees are women and youth. The informal sector is permanent for many new urbanites, and defines the landscape, politics and economy of contemporary african cities.
The informal sector is a large part of employment in african cities. Health risks and informal employment in south africa. Pdf sustainable tourism development challenges in the. In developing world, particularly subsaharan africa, poverty reduction has. The african development bank estimates that the informal sector contributes about 55 per cent of subsaharan africa s gdp and 80 per cent of the labour force. Finally, we look at strengthening the informal sector. However, only 5% were involved in informal entrepreneurial activity and only 2% had owned a business in the formal economy in their home country. Thirty four percent of those who work in south africa, are in informal employment1 ilo, 2018.
Econometric models informal sector national accounts shadow economy subsaharan africa. The importance of enabling the informal sector and taking. An overview of the nonprofit sector in south africa there were 127 032 nonprofit institutions npis in 2014, according to a report released by stats sa. It also finds significant heterogeneity, with informality ranging from a low of 20 to. This is one of the few areas of, albeit modest, employment growth. On the one hand, a large informal sector often adds to city congestion, through informal. Informal employment accounts for a smaller share of nonagricultural employment in southern africa 33% in south africa and 44% in namibia relative to countries in other subregions 82% in mali and 76% in tanzania vanek et al 2014. This paper provides a detailed quantitative descriptive analysis of the south african informal sector between 1997 and 2006 using the october household survey and the labour force survey data. Informal trading has always played a role in south africa s economy. A job in the informal sector reduces poverty about as much as. A survey madhura swaminathan centre for international studies, m. Thus we argue that the informal sector in south african is small precisely.
Discussion of research findings the research findings were discussed under the following subheadings. Temporal and spatial enterprise change in a township informal economy. In south africa, new thinking about informal sector and its contribution to local economic development new thinking encourages local municipalities to view informal sector as a key service delivery function municipalities need to balance their regulatory function of the informal sector with the need to. The impact of globalization on the informal sector in africa. An informal economy is the part of any economy that is neither taxed nor monitored by any form.
We consider the reasons for high informal sector employment in south africa. Employment in the informal sector world bank documents. The prominence of the informal sector in most african economies stems from the. Spaza shops, street vendors, car guards and taxi drivers all form part of the informal sector.
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